Because it was valued for its beauty, and because it best fufills the criteria for what makes good money, it gradually gained more and more value as people realized that others were using it as money and that they would be able to easily trade it for what they did want. Now it has a high value, both for its beauty and its use as money. Because it is valued highly, people buy it and store it, thinking that it will gain in value or retain the value of their savings.
Because of fashion trends and logistics. Still, almost all clothes are actually worn by someone sometime.
But why is most of the gold stored in bank vaults? I would even guess that most of the gold ever extracted has never been used as jewelry or decoration, but has been shipped directly from gold mines/metallurgic plants to bank vaults. That is not the case with clothes.
You seem to be using it as if to say that a bunch of people got together and decided what they should use as money, taking into consideration what else the potential money commodities could be used for.
its a subjective matter, only concerning the present holder of gold. It will factor in for what the holder will demand in exchange for its release. the more he wants gold for his own, other alternate purposes (alternate to the spending of it for purchase of some goods), the more he will have to be inticed with to part with it, ceteris parabis. this is contra your position.